BILL O'REILLY, HOST: The "Top Story" tonight. How would political wizard Karl Rove handle Obama's counterattack? Mr. Rove joins us now from Florida.

OK. You are in charge of this campaign. And is he doing the right thing by going to the safe, friendly venues first? Is that a smart move? What else would you do?

KARL ROVE, FORMER BUSH ADVISOR: First of all, he chose a strategy that I would not have recommended. Which was to take this incident with Reverend Wright and made it a question of race. I think is best option was to at the beginning say, do you know what? I made a mistake. He said these vile things about our country and racially divisive comments and I should have spoken up at the time. And I did not and I regret it and I'll never let it happen again.

O'REILLY: Wouldn't he not have had to explain why he did not speak up because it happened over such a long period of time? Would that not have opened the door to his judgment and courage?

ROVE: Well, it could've. But look. Senator McCain, you recall Senator McCain in 2000 that he refused to speak out on the confederate flag being flown in South Carolina. And, after the election, he said he regretted not having spoken out. And the media give him a lot of credit for having done so. I think their response this time around would have been the same. Hurray. He is not perfect a perfect individual, he admitted a mistake and he admitted it and moved on.

As it is, he has chosen a path that I think will be difficult for him in the weeks and months ahead. Because he has said you cannot look at those comments by Reverend Wright's comments as simply animosity toward the country. You need to look at it, they are repugnant but you need understand that they're part of a broader anger in the black community and we need to have a dialogue about race. In fact, we need to talk about the anger in the black community and the anger in the white community. As a result, it will get him short-term gain because the media is not going to be willing to spend a lot of time talking about it. But it is does not make the issue go away. He needs to make the issue go away.

The path that he has chosen, though, he is doing very smartly. He is going out and talking to friendly media. He is attacking his opponent in order to also change the subject. He is going to be aided by the fact that Easter is coming up. Which is going to make for a natural break in this. But he is doing right things, but I think he chose the wrong path in the beginning.

O'REILLY: But you are saying after Easter, he should get away from it entirely? Come back after Easter and just change the subject.

ROVE: Right.

O'REILLY: Now, when a guy like Obama says "typical white person," now I knew he did not mean any slight by that. I think fair minded people would. But If I said on this program or you said "typical black person," then all hell breaks loose, correct?

ROVE: Well, yes, in fact, look, I have read the speech again and again. I could probably give it myself if I keep this up next week. In it, he constantly makes the moral equivalencies. He says — he equates his grandmother's private comment to his pastor public rantings. He then takes the Wright comments and attends to place them in some sort of frame of naturally understood black anger, and then he says, we need to understand that there is white anger as well. You know, for a guy who wants to supposedly be post-racial, somebody who sort of aspires to the image of Martin Luther King's color-blind society, that seems an odd way to try to frame this thing.

O'REILLY: Now, the controversy will die down, I believe next week. With the resume that is loaded up with Michelle Obama's comment, with Reverend Wright, everything that he says that could be interpreted as a slight —because you are going to hear this "typical white person" thing — this is going to be around tomorrow. I don't know if it's going to be big but it will be around.

So now you've taken a lot of the spontaneity away from Barack Obama. He is a man who thinks on his feet, speaks extemporaneously. But now, he has got to be censoring himself. Because any mistake can and will be used against, correct?

ROVE: That is correct. And look, remember, I would suspect a lot more people have seen Reverend Wright's comments on television and were able to watch his speech. Even those who saw it on the evening news on the regular networks, not the cables who ran more extensive parts of it. On the networks, the segments that were run were not generally the most positive. A lot of them ran the segment where he said he could no more disavow Reverend Wright then he could this about the black community, he could no more disavow Wright then he could disavow his own grandmother. And these were not the best high points of the speech.

O'REILLY: So sum it up, because we are going to take a break and bring you back and talk about Iraq. I have a lot of questions for you on that. Sum it up, he can get away from this now, but it is always going to be there and it might resurface at any time. Which is not a good place a presidential candidate wants to be. Correct?

ROVE: That's right. Exactly. We live in a culture of the visual and there is a lots of film out there of Reverend Wright saying obnoxious things. More will surface, I suspect in the next seven and a half months. And there is probably going to be some powerful way in which this is shared with the American people again.

O'REILLY: We'll have more with Mr. Rove in a moment.

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O'REILLY: Continuing now with FOX News analyst and former Bush advisor Karl Rove. Five years ago, American forces were achieving a stunning victory in Iraq, overwhelming Saddam's forces in just 22 days. Since that time, things have gotten a lot tougher. Nearly 4,000 Americans have died in Iraq. More than $400 billion has been spent.

The polls say about two thirds of Americans do not feel the war has been worth it, including 27 percent of Republicans. So Mr. Rove, can you persuade the folks it has been worth it? And here's what people say to me all the time: We don't understand, for all the blood and treasure spend, how this is making us safer — how exactly our presence in Iraq is making us safer. They do not understand it, even five years after the action. So what say you?

ROVE: Well, remember, we removed, as you said, Saddam Hussein in 22 days. But then the enemy, the Al Qaeda extremists, decided to make the central battlefield in the global war on terror. This will be worth that if we win. If we win we will have dealt the enemy a huge blow in a battlefield they chose to confront us on.

And it will send a powerful message throughout the Islamic world. I think Bernard Lewis of Princeton is accurate. That the Muslim world is waiting to see who is going to win the conflict. Is it going to be the West or is it going to be Al Qaeda? And by winning, we will send a powerful message that the momentum is on our side. And it will rally the Muslim world to us. It will also create a huge influence in the Middle East. Think about the creation of the democracy in the historic center of the Middle East with the third-largest oil reserves in the world. If we have a functioning democracy in Iraq, that's an ally in the war on terror, a counterweight to mullahs Iran and to Assad in Syria, this will create a very hopeful center of reform and energy for reform throughout the Middle East.

O'REILLY: How much treasure does the United States have to spend there? Four hundred billion dollars and the war is not yet won. I believe, as you do, that it can be won. But it will require probably another $400 billion.

Now, number one, why isn't the Iraqi government paying us back from oil revenues, which they have now stored in New York City? Why isn't that happening?

ROVE: They are using those moneys to do what we need them to do, which is to provide for their own security and provide for their own reconstruction, and provide the aid from the central government to the provinces. To keep together this coalition of Sunni and Shia...

O'REILLY: ...they cannot pay us back 20 percent of the revenues to do it?

ROVE: They can pay us back by becoming a stable democracy in the heart of the Middle East that is an ally in the war on terror. We did not say after World War II, you know what, Germany, you need to pay us back? We did not say after World War II, look, Japan and Korea you need to pay us back.

Because we understood that by creating democracies and allies, we created stability in the world. Now I know there's a lot of treasure that we have put into this enterprise. But think about if we had approached the Cold War in the same way. If we had said it is 1963 or 1959 or 1971 and we have spent enough. We are not going to spend more. Think how the world has changed because the United States showed the commitment and resolve that it did in the aftermath of World War II, ... in the long conflict of the Cold War.

O'REILLY: Are we not putting a lot of faith in people who may not come through? Five years we have a weak central government in Baghdad, you have an army that some units fight, some units do not, you have a lot of corruption in the country. And we're putting our faith in people that you know, a lot of Americans say, look, they are not worth it. The Iraqis themselves are not worth it, they are not stepping up the way they should to be partners with us in this venture. And I think that is a legitimate criticism.

ROVE: Well, I understand that. I understand those concerns. I would make this argument in response. First, I think the Iraqis have demonstrated particularly in the last year a fearlessness in taking on this conflict. When it became obvious the United States was going to change its strategy and engage and fight and protect. They joined with us. We saw this — The Anbar Awakening.

O'REILLY: Some of them...

ROVE: Well in large numbers. Everything that we know about their military units and security forces is that over the last year-and-a-half, there has been a significant improvement in operational abilities and their willingness to engage the enemy.

The second point I'd make is that we're focusing on only part of the equation when we look at the Iraqis. We need to look broader than that. If we defeat the enemy, it will send a message throughout the Muslim world, throughout the world of Islam that the West can be a dependable ally in confronting extremists. People there in the Middle East are looking and people inside the Islamic world are looking to make a decision whether they should ally themselves with the enemy or with the forces of moderation, reform and the West. And we need to make certain they do the latter, not the former. That's why victory in Iraq is so important.

O'REILLY: Why do so many Americans not understand what you just laid out?

ROVE: Do you know what? I am not certain that I agree that a lot of Americans don't. There is an interesting poll that I have a column about it tomorrow in The Wall Street Journal. The Gallup Poll last month found that 18 percent of the American people believe that we should withdraw the troops from Iraq on a timetable as rapidly as possible — without regard for conditions. That is less than 1/5 of the American people who say get them out now regardless of the consequences, regardless of the conditions.

That means the rest of the American population either want to stay, fight, and win, or withdraw on a schedule. In fact, two thirds of the people in the poll said American troops should not withdrawn until we can guarantee that stability can be preserved in Iraq.

O'REILLY: All right. Mr. Rove. Thanks very much. Very interesting as always. Happy Easter to you.

ROVE: Same to you, Bill. Happy Easter to you and yours.

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